Blacklisting on Construction Projects

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Peregrine Conley
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1 Report to the Local Authority Pension Fund Forum October 2013 Blacklisting on Construction Projects Summary Blacklisting of employees because of their trade union activity is unlawful and can result in those affected seeing their employment prospects severely damaged. Following a raid by the Information Commissioner s Office in 2009, the existence of a blacklisting database, operated by The Consulting Association, was revealed. Two construction companies are currently subject to compensation claims from groups of employees who allege they were blacklisted. More claims are expected.there are contested claims of ongoing blacklisting by construction companies. LAPFF s has two principal interests in this issue the potential financial compensation costs incurred by companies, and the risk of reputational damage. Recommendations That LAPFF considers engaging with a number of construction companies to assess the likelihood of potential claims and to stress the need to respect employment rights. Report Origination: PIRC Limited Report Author: Tom Powdrill tomp@pirc.co.uk

2 1. Introduction 1.1. In 2009, a raid by investigators from the Information Commissioner s Office (ICO) on The Consulting Association (TCA) confirmed the existence of a blacklisting database, holding details on several thousand individuals. TCA grew out of the Services Group of the now defunct Economic League, and focused on collating information on individuals working in the construction industry It is clear from reports from those involved, and from comments about individuals logged in the TCA database that have since been made public, that the primary function of the database was to flag concerns about potential employees, principally due to trade union activity. The TCA was wound up following the ICO s intervention The existence of ongoing blacklisting, utilising the TCA database, came to light as a result of a number of employment tribunals. It is possible that hundreds, or possibly thousands, of people have had their employment prospects unfairly damaged as a result. The damage done to individuals on the TCA database is yet to be quantified, and there are ongoing compensation claims against companies which utilised the information This summer a LAPFF member fund, West Midlands, asked that the Forum explore the blacklisting issue. Therefore, this paper explores the background to this issue, and makes recommendations for possible future engagement with a number of companies. 2. Background 2.1. The monitoring of employees trade union and political activity by existing and potential employers is nothing new, nor is the allegation that some companies utilise a blacklist to weed out potentially troublesome employees. The Economic League, a pro free enterprise group set up in 1920, became notorious in the 1980s for maintaining a blacklist which included information on thousands of people. It counted a number of major companies, including Ford, amongst its subscribers Eventually public and political pressure led to companies severing their ties with the Economic League, leading to its income dwindling, and the organisation was wound up in However a new organisation, The Consulting Association was created and took over many of the Economic League s files. TCA was headed up by Ian Kerr, who ran the Economic League s Service Group, which focused on the construction industry The close involvement of construction industry companies in the TCA s work can been seen in the facts, disclosed by Kerr, that its steering group was formed of construction company representatives, and that they drew up its constitution and formulated its key operation features. Kerr also revealed that TCA was loaned money by Sir Robert McAlpine during its founding. Subscribers to TCA s database service comprised of construction firms, including a number of significant PLCs After ongoing allegations of blacklisting, the ICO launched an investigation into TCA which it says ran a covert operation to vet construction workers for employment in the industry. Ian Kerr was fined and the ICO issued enforcement notices against 14 Local Authority Pension Fund Forum,

3 construction companies (a number of which are related). This is discussed further below Describing to the Scottish Affairs Committee why the Consulting Association was involved in activities such as the monitoring of employees, activist groups and publications, the group s former Chief Officer, Ian Kerr, said: By and large, that was to allow the companies to get on with what their role was, which was to construct to fulfil an obligation, a contract, on time, get off the site on time, fulfil its shareholder obligations Whilst TCA might consider it was helping companies do their job, or even fulfil their duties to shareholders, the practical impact of its monitoring was to adversely affect the employment prospects for those on its files One engineer featured on the TCA database was told by an employment agency that a big employer had told them never to offer him a job or assign him anywhere. He described the effects of being blacklisted on his lifestyle: 2.8. Within a 12-month period, my income was cut by two thirds. This was in the middle of a building boom, when the industry was crying out for skilled labour. There were adverts in the newspapers all the time, but if I ever applied to get a job I could not get one at all. I was a qualified engineer in the middle of the building boom, and my kids were on milk tokens Why blacklisting is wrong 3.1. Blacklisting of employees is not simply a questionable way for a responsible employer to behave, it may potentially involve breaches of both the Data Protection Act and employment law. In terms of data protection, it should be noted that Ian Kerr was fined 5,000 by the ICO for breaching the Act (on the rather technical point of failing to register as a data controller). 3 Notably, an official from the ICO stated at an employment tribunal relating to blacklisting that some of the information held on employees could only have been supplied by the police or the security services The ICO also issued enforcement notices against the following 14 companies which had used the TCA s database, demanding that they stopped the practice. These were: Balfour Beatty Civil Engineering Limited Balfour Beatty Construction Northern Ireland Balfour Beatty Construction Scottish & Southern Limited Balfour Beatty Engineering Services (HY) Limited Balfour Beatty Engineering Services Limited Balfour Beatty Infrastructure Services Limited C B & I UK Limited Emcor Engineering Services Limited 1 Scottish Affairs Committee, Blacklisting in Employment: Oral and written evidence, Q Scottish Affairs Committee, Blacklisting in Employment: Oral and written evidence, Q Local Authority Pension Fund Forum,

4 Emcor Rail Limited Kier Limited N G Bailey Limited Shepherd Engineering Services Limited Sias Building Services Limited Whessoe Oil & Gas Limited 3.3. The ICO deputy commissioner has pointed out that the fine issued to Kerr was the maximum legal punishment available to it, and said that it was disappointing that larger penalties could not be issued. The ICO can lodge larger fines (up to 500,000) but only for offences after April The issue of construction company liability for utilising the TCA database in a way which breached employees rights is the subject of ongoing activity. According to reports, the information on the TCA database primarily relates to trade union activity. Therefore if companies used this information to screen out potential employees this represents a potential breach of Section 137 of the Trade Union and Labour Relations (Consolidation) Act This states: (1) It is unlawful to refuse a person employment (a) because he is, or is not, a member of a trade union (b) because he is unwilling to accept a requirement (i) to take steps to become or cease to be, or to remain or not to become, a member of a trade union, or (ii) to make payments or suffer deductions in the event of his not being a member of a trade union (2) A person who is thus unlawfully refused employment has a right of complaint to an employment tribunal 3.5. There is more recent law, which came into force in 2010, in the shape of The Employment Relations Act 1999 (Blacklists) Regulations This makes it unlawful to compile, supply, sell or use a prohibited list (a blacklist) subject to certain exceptions. 8 Individuals, unions or others affected can take claims relating to a breach of this prohibition to county court. The court can in turn award damages. 4. Claims against companies 4.1. Some employees who were denied employment as a result of a company using information on the TCA database have taken this to employment tribunal. Unfortunately for some of those affected they may be unable to progress a claim via a tribunal. For example, one central case the claimant lost because they were technically employed by an employment agency, rather than directly by the company utilising the blacklisting database. This was the outcome in the case of Dave Smith, a former engineer who gave evidence to the Scottish Affairs Committee inquiry into blacklisting Local Authority Pension Fund Forum,

5 4.2. There is an ongoing class action by a group of workers against companies which they claim breached their rights when they were blacklisted, with Sir Robert McAlpine and Carillion being the two companies being targeted initially. Carillion has apologised for its involvement with TCA, but also challenged the GMB s version of events. 9 Sir Robert McAlpine has to date not acknowledged any fault So far around 100 workers are involved in the cases against the two companies. However, there has been speculation that the case against Sir Robert McAlpine could grow to involve 200 workers, and that against Carillion to 100 workers. That in turn potentially represents only a small minority of those listed on the TCA database The GMB has asked the ICO to allow it access to the TCA database, in order that it might identify members or former members, to facilitate further claims. The ICO has not agreed to this, though it has agreed to GMB officials having partial access to a spreadsheet of those named on the blacklist to help identify members. 10 The ICO has said that it does wish to respond positively in assisting blacklisting victims. 5. Ongoing blacklisting? 5.1. Whilst the cases involving TCA have confirmed the existence of a blacklist, and suggest that some companies may have used it to screen out certain employees because of their trade union activities. This may lead to financial recompense However, despite the winding up of TCA, some trade unionists allege that there is an ongoing issue in the construction industry. For example, in September 2012 an electrician, Frank Morris, working on the Crossrail project was dismissed, which he alleged was due to trade union activity. The Unite trade union took up the case and campaigned for his reinstatement. The Crossrail consortium Bam Ferrovial Kier (BFK) denied that Morris had been dismissed because of blacklisting, and initially offered to re-employ him elsewhere In September 2013 a joint statement by BFK and Unite announced that they had successfully concluded matters between them in relation to BFK s joint venture on the Crossrail projects. According to reports of the agreement, Frank Morris has been reinstated and will work at Crossrail s Liverpool Street station. 11 Notably the joint statement also reports that there has been no contravention of the Blacklisting Regulations on the BFK Crossrail projects. The chief executive of Crossrail accused Unite of making a series of misleading and unsubstantiated allegations concerning blacklisting Local Authority Pension Fund Forum,

6 6. Shareholder engagement options 6.1. The Forum is likely to have two principal concerns relating to blacklisting. The first is that the issue could become a reputational problem for companies in which members invest, making it harder for them to maintain positive employment relations and, potentially, to win business. There is already some pressure to not award business to those companies facing claims until the employees affected have been compensated. 13 The second issue is that historical claims relating to blacklisting could result in financial penalties for those companies involved It is not LAPFF s role to micromanage companies or to take sides in disputes between management and the workforce. The Forum s interest is in that investee companies are operating in a responsible way that protects members long-term financial interests. Clearly this must require operating within the law, but should also take account of the possible consequences of reputational damage Therefore LAPFF could consider engaging with a number of PLCs in the construction sector with two objectives To ascertain the likelihood of any financial claims against the companies in relation to blacklisting; and To stress to investee companies that, whilst LAPFF supports management s right to manage, it considers that this is within a context in which employment rights are properly respected If LAPFF agrees that such an approach is appropriate there are a number of public companies which could be contacted and which feature on the TCA member list To date, with the chair s agreement, LAPFF has written to Kier Group to request a meeting to find out more about the blacklisting issue, in light of the fact that the company s AGM is taking place in November. Kier Group is both featured on the TCA member list and was issued with an enforcement notice by the ICO. It is also one of the members of the Crossrail consortium. The company has provided the Forum with more information and has offered to meet in person if desirable Given the existence of the compensation claim against Carillion, this might be considered the most pressing engagement option Local Authority Pension Fund Forum,

Unite Legal Services. Blacklisting Own Up, Clean Up, Pay Up.

Unite Legal Services. Blacklisting Own Up, Clean Up, Pay Up. Unite Legal Services Blacklisting Own Up, Clean Up, Pay Up www.unitetheunion.org Unite Legal Services 3 1) Blacklisting the nature of the beast Widespread employer blacklisting of trade unionists has